High-flier ‘brought to earth’

Press, 22 January 1988, Page 22

High-flier ‘brought to earth’

The placing of Charter Corporation in receivership yesterday brings to four the number of listed companies to find themselves in that unfortunate position since the October sharemarket crash. The other receiverships are Investment Finance Corp, Strategic Capital, and Leverage Investment Corp. Formed four years ago, Charter was one of the first of the new group of highflying investment-orientated firms which came to prominence during 1985 and 1986. Now it has been brought down to earth. The company’s shares have plummeted from around 70c before the crash to 10c yesterday. It indicated that nearly all the $lOO million worth of assets it owns will now be sold off. Charter’s founder and managing director, Mr Chris Castle, said that, based on the most recent information presented to directors, the company appeared to have positive shareholders funds if the asset sales were on an orderly basis. However, he would not give details of Charter's current financial position. At the annual meeting last month, he said the group had total assets of $lOO million and net assets of $5O million, and that the sharemarket fall had made minimal impact on the company’s investment profile. He also disclosed then that Charter was suffering short-term liquidity problems stemming from delays in establishing long-term finance lines.

Mr Castle said that the company had been working with its legal advisers, auditors and bankers since the annual meeting in an attempt to resolve the problems. However, the banks had refused to give further funding. He would not name the banks involved, but said they were a range of trading and merchant banking institutions. The Charter board had decided a receivership would be the best way out of the situation, but this was not a simple matter because nobody held a debenture over the company. Charter was therefore arranging for its major shareholder, AA Mutual Insurance, to take up a small debenture which would then give it power to call in the receivers. Once a receiver and manager of the company’s assets had been appointed it was planned to draw up a scheme of arrangement to be approved by creditors and the High Court under the Companies Act. Under the scheme the company’s assets would be sold off in an orderly basis in the interests of all creditors during “moratorium period”. Mr Castle said the board had considered this a better approach than a rapid-fire-sale of assets in an attempt to improve Charter’s liquidity. He said it would be up to the receiver to decide whether the company could continue once the assets had been realised, and whether he would have a continuing

role. Charter employs 600 people in New Zealand and Australia through its various subsidiaries, particularly through the Arpac International goat breeding activities and the confectionery firms, Regina and N.Z. Food Group. Mr Castle said it would be up to the receiver in conjunction with the banks to determine whether -the operating subsidiaries would get continuing funds. Three weeks ago Charter put another smaller investment firm, Leverage Investment, into receivership after earlier pumping s2m into it. Charter owns about 17.6 per cent of Leverage. •Charter also appeared to have suffered a setback last month when the Minister of Conservation, Ms Clark, vetoed the Monowai gold mine project on the Coromandel. Charter owns 50.3 per cent of Premier Mining Securities which owns 35 per cent of Monowai developer Spectrum Resources. However Mr Castle said the Monowai and Leverage problems were not significant factors in the receivership decision. Charter began in late May, 1983, as Charter Investments, the investment arm of then listed Regina Confections of Oamaru, with initial funds of $120,000. By the end of 1983, Charter had total assets of SI.2M net assets of $668,000 and taxpaid earnings of $llO,OOO. Charter Corp was as

a public company in February 1984, buying all the shares of Charter Investments from Regina. The company was publicly floated the same month. The company’s original share portfolio included 4 per cent of Tourist Corporation of Fiji and 5 per cent of Crusader Minerals. The company planned to be an active share trader and portfolio and business investor. It was interested in building up sizeable shareholdings in larger companies. Charter invested in alluvial gold mining, thoroughbred breeding, cut flower exports and a new ice-skating venture. In 1986 Charter was instrumental in floating two investment companies: it helped restructure flower group Fleur into Leverage and took a 25 per cent shareholding in foreign currency dealer Australis International. Charter called in receivers for Leverage late last month, after putting a takeover bid for Australis on hold a couple of weeks earlier. Last year it bid for all of the shares in troubled goat breeder Arpac International Ltd, almost completing its target by the end of the year. Reviewing the company’s problems at the annual meeting, Mr Castle said its problems stemmed not from direct sharemarket exposure and a consequent fall in value of investments, but from failure to put in place finance deals - before .the crash.